Appeal from the District Court of the First Judicial District of the State of Idaho, in and for Kootenai County. The Hon. John T. Mitchell, District Judge.
The opinion of the court was delivered by: Eismann, Chief Justice.
The judgment of the district court is affirmed in part and reversed in part.
This is an appeal from a judgment of the district court vacating the denials of the respondents' applications for dock permits on Lake Coeur d'Alene and awarding judgments for court costs and attorney fees against the Idaho Department of Lands and the Idaho Transportation Department. We affirm the judgment vacating the denial of the dock permits, and we reverse the judgments for court costs and attorney fees.
I. FACTS AND PROCEDURAL HISTORY
Lake CDA Investments, LLC, and Chris Keenan (Landowners) each own property littoral to Lake Coeur d'Alene. In 1911, one of the Landowners' predecessors in interest granted Kootenai County a sixteen-foot wide easement across the properties for a road. In 1925, that easement was expanded by grant to fifty feet in width. In 1940, another predecessor in interest conveyed a right of way across the properties to the State of Idaho. That deed (1940 Deed) purported to grant the State a right of way that was 125-feet wide. The legal description of the right of way extended a considerable distance out into the lake. Only 0.92 acres of the right of way was on the grantors' property, and the remaining 1.240 acres consisted of state-owned lakebed. The 1940 Deed did not purport to transfer any riparian rights to the state, or to extinguish the grantors' riparian rights. The State widened the existing road into a four-lane highway. On that portion of the highway at issue in this case, the State placed substantial fill into the lake along the shoreline in order to widen and straighten the road.
In the 1990's, the Idaho Transportation Department removed the two lanes of the highway bordering on the lake and erected a guardrail along that portion of the highway to divide the remaining two traffic lanes from the strip of land from which the two traffic lanes were removed. That strip of land was converted into a bicycle/pedestrian trail and a park. On October 2, 1998, the Transportation Department and the Idaho Department of Parks and Recreation (Parks Department) entered into a written agreement under which the Transportation Department agreed that it will ―[r]etain jurisdiction, responsibility for, and provide maintenance of the traffic roadway surface,‖ and the Parks Department agreed that it will ―[a]ccept in full and every respect the maintenance and operation of and responsibility for the section of the bicycle/pedestrian trail.‖
The State Board of Land Commissioners has the power to grant encroachments in aid of navigation in or above the beds of navigable lakes, I.C. § 58-1303, which includes Lake Coeur d'Alene. It exercises that power through the Idaho Department of Lands. I.C. § 58-101. For convenience, they will both be referred to as the ―Land Board.‖
In July 2006, Lake CDA Investments, LLC, submitted an application seeking permission to construct a single family dock that would be contiguous with the shoreline of its property. In November 2006, Chris Keenan submitted an application seeking permission to construct a single-family dock that would be contiguous with the shoreline of his property. The Transportation Department objected to both applications. The Land Board combined both applications for hearing before a hearing officer, who held an evidentiary hearing on March 30, 2007.
A surveyor employed by the Transportation Department testified that in his opinion the 1940 Deed made the Landowners' riparian rights ―subordinate to the easement‖ in front of their properties. His testimony indicated that he believed the easement granted by the 1940 Deed extended out into the lake.
On May 18, 2007, the hearing officer issued his proposed findings of fact, conclusions of law, and recommendation. He held that ―[i]t is established precedent in Idaho that a right-of-way can sever riparian rights‖; that ―the littoral right became subordinate to the ‗highway' with the 1940 Right-Of-Way Deed‖; and that ―[w]hen that subordination occurred, the property lost those parts of their littoral rights which support the ability to wharf out.‖ He concluded that without those littoral rights, the owners of the properties were not qualified to apply for a dock permit.
He also concluded that the Transportation Department still owns the highway; that the navigational encroachments will be placed on the highway; and that the Department believes ―the navigational encroachments will potentially compromise the road prism and potentially limit their ability to maintain and repair that road prism and therefore [it] will not authorize, or permit, the subject navigational encroachments.‖ This latter finding was based upon conclusory hearsay testimony provided by the surveyor who testified on behalf of the Transportation Department.
The hearing officer recommended that the dock permits be denied. The Land Board accepted the hearing officer's findings of fact and conclusions of law and denied the dock permits.
The Landowners each timely filed a petition for review with the district court. The Transportation Department sought and was granted permission to intervene, and both appeals were consolidated. The district court held that neither the 1940 Deed granting the State an easement down to the ordinary high water mark nor the State's action in placing fill in the lake affected the Landowners' littoral rights. The court therefore vacated the Land Board's decisions denying the Landowners' respective applications for dock permits. The court also held that the Landowners were entitled to an award of court costs and attorney fees pursuant to Idaho Code § 12-117. It awarded judgments for court costs and attorney fees totaling $23,128.51 against the Land Board and Transportation Department, and they both timely appealed.
The denials of the Landowners' applications to construct navigational encroachments were subject to review by the district court pursuant to Idaho Code §§ 58-1305(c) and 58-1306(c). The Land Board's decisions must be affirmed unless its findings and conclusions are:
(a) in violation of constitutional or statutory provisions; (b) in excess of its statutory authority; (c) made upon unlawful procedure; (d) not supported by substantial and competent evidence; or (e) arbitrary, capricious, or an abuse of discretion. Dupont v. Idaho State Bd. of Land Comrs., 134 Idaho 618, 621, 7 P.3d 1095, 1098 (2000). ―When the district court acts in its appellate capacity, we review the decision of the district court to determine whether it correctly decided the issues presented to it on appeal.‖ Idaho Dept. of Health and Welfare v. Doe, 148 Idaho 124, 126, 219 P.3d 448, 450 (2009).
A. Did the 1940 Right-of-Way Deed Extinguish the Grantors' Littoral Rights?
In reaching its decision, the Land Board stated, ―It is established precedent in Idaho that a right-of-way can sever riparian rights.‖ It then held that the littoral rights associated with the Landowners' properties were subordinate to the highway easement granted by the 1940 Deed and that ―[w]hen that subordination occurred, the property lost those parts of their littoral rights which support the ability to wharf out.‖ Without those littoral rights, the Board held that the Landowners were not qualified to apply for dock permits. The district court held that the 1940 Deed granted the State only an easement*fn1 and that the easement did not extinguish any of the grantors' littoral rights.
The Land Board argues that the district court erred because the easement granted by the 1940 Deed is subject to the Transportation Department's easement. According to the Board, ―The Land Board's finding that the Applicants' use of the shoreline for docking purposes was subject to ITD's use of the same for highway purposes pursuant to the 1940 right-of-way deed was supported by well established principles of easement law.‖ It is not clear what the Land Board understood the width of the easement to be. Not all of the testimony of the surveyor who testified regarding this issue on behalf of the Transportation Department is preserved in the record.*fn2 However, it appears from ...